Goldman Sachs said, on Friday, that the appointment of Mehmet Simsek as Turkish Minister of Treasury and Finance and “Hafizah Ghaya Arkan” as governor of the Central Bank indicates the new administration’s realization of the need to make monetary and financial adjustments.
And the bank said, amending a number of its expectations for Turkey, that the stability of the economy “will require a major adjustment, and we believe that it will take place in stages in the exchange rate.”
“In our view, this indicates that the traditional policy maker will raise interest rates to 40 percent,” Clemens Graf said in a note to the bank’s clients.
Once the exchange rate and inflation expectations are stable, Graf added, the interest rate could be lowered quickly, perhaps to 25 percent by the end of the year.
Goldman Sachs cut its forecast for Turkey’s gross domestic product growth to 2.3 percent year-on-year in 2023, down from 2.9 percent in a previous forecast.
The Turkish currency has been under great pressure since President Recep Tayyip Erdogan announced the formation of his new government at the beginning of the week after winning a new presidential term, and its losses since the beginning of the year have reached nearly 19 percent.
The Turkish lira fell to a new record low against the dollar, last Wednesday, more than a week after the re-election of President Recep Tayyip Erdogan, recording 22.98 liras to the US dollar.
The Turkish authorities succeeded in maintaining the stability of the lira for most of this year, consuming tens of billions of dollars of foreign reserves for this purpose.
Net foreign exchange reserves of the Central Bank of Turkey hit an all-time low of $4.4 billion on May 26
May.
(Reuters)
2023-06-09 22:41:14
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